Banks not passing lower interest rate benefits to borrowers, developers: CREDAI tells RBI

Realtors' apex body CREDAI has written a letter to RBI, complaining that banks are not passing lower rate benefits to home loan borrowers and cash-starved developers

Press Trust of India May 27, 2020 17:05:26 IST
Banks not passing lower interest rate benefits to borrowers, developers: CREDAI tells RBI

New Delhi: Realtors' apex body CREDAI has written a letter to RBI, complaining that banks are not passing lower rate benefits to home loan borrowers and cash-starved developers.

The association requested RBI Governor Shaktikanta Das to direct banks to pass on the rate cuts to non-banking finance companies (NBFCs) and housing finance companies (HFCs), which are the major source of funds for real estate developers.

In its letter to the Reserve Bank, CREDAI said that the central bank has taken various steps to infuse liquidity in the system during this current crisis, including a reduction in repo rates and reverse repo rates and providing moratorium on loan repayment.

"The real estate sector, however, is not able to leverage the benefits of this reduction in repo rates," the Confederation of Real Estate Developers' Associations of India (CREDAI) said.

RBI has directed the banks to link floating rates on housing loans to external benchmarks, but the same is not made applicable to NBFCs and HFCs, it added.

"While the RBI has reduced 2.50 percent in repo rates since January 2019, the maximum reduction passed on by banks to the borrowers has been between 0.7-1.3 percent, largely from August 2019 till date. In some cases, however, no benefit of repo rate reduction has been passed on at all," CREDAI said in the letter.

Stating that NBFCs and HFCs are the major financing source for the real estate sector, the industry body said that because of these impediments, the industry is getting access to finance at much higher rates.

CREDAI said RBI should issue appropriate directions to banks to pass on the benefits of rate cuts to NBFCs/HFCs to enable them to lend to the real estate sector at a lower rate of interest.

Earlier this week, CREDAI also wrote a letter to Prime Minister Narendra Modi, recommending seven measures for survival of the industry during the coronavirus pandemic.

The real estate sector is facing a multi-year demand slowdown and has huge unsold inventories. The stress has exacerbated due to the coronavirus pandemic.

The sector got a breather from the over Rs 20 lakh crore economic package announced by Centre in the form of extension of interest subsidy scheme till March 2021, and 6 months extension for completion of existing projects.

However, the industry body has said that this is not enough and more needs to be done to boost demand.

Updated Date:

also read

Ashok Chavan slams Modi govt on 7th anniversary, praises Nitin Gadkari as 'right man in wrong party'
India

Ashok Chavan slams Modi govt on 7th anniversary, praises Nitin Gadkari as 'right man in wrong party'

Addressing a virtual press meet, Chavan said the Centre had kept all decision-making powers, but was now blaming the COVID-19 crisis on state governments

Cancel Class 12 Board exams given COVID-19 situation, FICCI urges Centre
India

Cancel Class 12 Board exams given COVID-19 situation, FICCI urges Centre

FICCI president Uday Shankar, in a letter to Union minister Ramesh Pokhriyal, asked the government to devise an alternative solution to determine academic progression

RBI keeps policy rate unchanged after six consecutive meetings; cuts growth forecast to 9.5%
Business

RBI keeps policy rate unchanged after six consecutive meetings; cuts growth forecast to 9.5%

MPC decided to maintain the status quo, that is keeping benchmark repurchase (repo) rate at 4%. Consequently, the reverse repo rate will also continue to earn 3.35% interest for banks